Accounting and tax
Hong Kong is a low-tax jurisdiction with liberal laws. Many of our Clients appoint Healy Consultants as their Hong Kong tax representative to assist with i) communicating with the Inland Revenue Department (HKIRD) ii) completing financial statements and corporate tax returns and iii) supervising independent auditors. Specific information about Hong Kong accounting and tax follows:
- For resident Hong Kong companies, the corporate income tax rate in the city is 16.5%. Hong Kong companies are only taxed on net profits arising from sales within Hong Kong;
- If properly structured, non-resident Hong Kong companies are legally tax exempt if no business activity is conducted in Hong Kong. No taxes on income earned offshore, even if it is remitted back into the city;
- There are no capital gains taxes, nor withholding tax, nor value added tax, nor sales tax, nor accumulated earnings taxes;
- Stamp duty on the transfer of shares in Hong Kong is 0.2% of their value, which is shared equally between the two parties involved. Property tax is levied at a fixed rate of 15% on the value of the property;
- Personal income tax is subject to the same territorial principle as corporate tax. There are 4 different brackets for tax rates, as shown in the table below:
Income bracket (HK$) Tax rate Under 40,000 2% 40,001 – 80,000 7% 80,001 – 120,000 12% Above 120,000 17%
- Annual corporate income tax returns must be filed with Inland Revenue Department on the 1st of April every year. Penalties might be imposed in case of delays;
- Annual audited financial statements must be submitted to the Inland Revenue Department. Healy Consultants assists our Clients efficiently and effectively complete this annual statutory obligation;
- For an active trading company, Healy Consultants accounting and tax fees of US$4,950 are an estimate of our fees to efficiently and effectively discharge your annual company accounting and tax obligations, excluding independent auditor’s fees. Following receipt of a set of draft accounting numbers from your company, Healy Consultants will more accurately advise accounting and audit and tax fees. For a dormant company, Healy Consultants annual accounting and tax fees are only US$950.
Miscellaneous Tax information
- Unlike many jurisdictions, business losses can be carried forward indefinitely in Hong Kong;
- A Hong Kong business benefits from the city’s 37 DTAs, which provide double taxation relief when dealing with countries like Germany, Singapore, UK, USA, etc.;
- It is important our Clients’ are aware of their personal and corporate tax obligations in their country of residence and domicile; and they will fulfil those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.
Legal and compliance considerations
- As of 2014, a Hong Kong business is required to have at least one director who is a natural person. A corporate director can no longer be the sole director of a company. If required, Healy Consultants will be pleased to provide your firm with a professional nominee director. Our fee amounts to US$1,950 per annum;
- All Hong Kong companies are required to have a local registered office and a resident secretary. Most of our Clients request Healy Consultants Hong Kong office to provide these services to their Hong Kong companies;
- After company incorporation, information such as capital structure and director/shareholder details are publicly available through the Companies Registry. This means less privacy for shareholders, but increases transparency of doing business in the city.
- Recruitment of foreign labour requires the employer to justify that the locals have not been denied the work opportunity. Furthermore, the foreign employee is expected to prove the he/she possesses the credentials relevant to the position;
- Residents of mainland China, Taiwan and Macau will require additional documentation when applying for an employment visa, such as copies of identity cards and copies of the applicant’s household registration;
- When employing local or foreign workers, employers must comply with the 2010 Employment Ordinance. These laws most resemble the English system of labour laws, in terms of employer responsibilities.
Licensing in Hong Kong
- From 1st May 2015, the hourly minimum wage in Hong Kong will be US$4 per hour;
- All employees must contribute to their employee’s social security fund. The contributions are divided equally among employees earning above US$916 (5%) and their employers (5%);
- Every year, our Client will face the following recurring costs for their active companies: i) business registration renewal ii) annual return filing and iii) audited financial statements submission;
- Healy Consultants provides our Clients with company de-registration service in Hong Kong. Please note that our fee for this service is US$2,450 and the process takes a minimum of 6 months.